GameSquare Esports Inc has posted second-quarter results that saw strong revenue growth powered by the company’s subsidiary Code Red Esports Limited and select customer wins.
For the period ended May 31, 2021, the Toronto-based gaming and esports company reported revenue of C$1.1 million as Code Red’s influencer vertical delivered another strong quarter.
“The core business of Code Red showed strong sequential results as the influencer component of the business posted quarterly revenue of $714,808, a sequential increase of 57% over Q1 FY2021 revenue, and talent management revenue grew to $202,571, an increase of over 15% compared to Q1 FY2021,” the company said.
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Meanwhile, GameSquare clocked up revenue of $2.15 million for the six months ended May 31, 2021.
The company noted that during the period it closed an upsized $7 million bought deal private placement in March to end the quarter with $4.3 million in cash on hand.
GameSquare also closed the acquisition of Reciprocity, which includes earn-outs for performance of up to US$7 million in revenue and US$1.4 million of EBITDA, or earnings before interest, taxes, depreciation, and amortization in the 12 months following the closing of the transaction.
During the quarter, GameSquare also announced select customer wins including production of the largest NCAA esports tournament with Van Wagner, The Drew League, and Dexerto.
In a statement accompanying the numbers, GameSquare CEO Justin Kenna said: “Code Red, our esports agency, had another strong quarter, with its ongoing focus on the influencer segment leading to growth of 57% over Q1 FY2021, and its talent management business growing more than15% versus the prior quarter. We made rapid progress on our acquisition strategy in Q2 and into Q3. In Q2, we closed the Reciprocity acquisition and have focused on integration and advancing substantial commercial opportunities.”
Kenna noted that the “strength” of the firm’s balance sheet and rapidly expanding platform capabilities has given large customers like Van Wagner the confidence to give it major contracts, including the production of the largest NCAA esports tournament.
“We expect these internal media, content and execution capabilities to accelerate the monetization of our recently acquired Complexity unit, an outstanding team-based organization,” added Kenna. “The acquisition of Complexity post quarter-end is transformational for GameSquare. Adding the Jones and Goff families as major investors and signing an agency of record deal with the Dallas Cowboys is an incredible milestone for GameSquare. As a top tier organization … Complexity is a media entity unto itself, generating more than 3.2 billion viewer minutes annually with 3.4 million monthly active unique visitors. While the team is world-class, we are only starting to monetize Complexity’s tremendous potential.”
Kenna said he believes that the “outstanding talent” at Code Red, GCN, and Cut+Sew/Zoned, the firm’s most recent acquisition, would speed up GameSquare’s business objectives of “revenue growth and profitability.”
GameSquare president Kevin Wright pointed out that since going public in October 2020, the company has “successfully sourced, financed, purchased, and integrated accretive businesses.”
“We have acquired outstanding strategic assets that position us to capitalize on the accelerating growth of esports audiences. We have the right mix of businesses and people to be a leader in bridging the gap between global brands and the massive esports audience through our unique blend of digital agency and team-based assets,” said Wright.
“With a record cash balance of nearly $15 million as of July 2021, we have the capability to invest in the monetization of our core asset portfolio. For the remainder of 2021, our focus will be on operational execution within our portfolio of companies. However, we will continue to look for opportunistic M&A of great companies that operate in the digital agency vertical,” he concluded.
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